Greek booksellers, pharmacies brace for fiscal change

Apr. 10, 2014
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Christos Fragoulis, 47, stands outside his bookshop on a pedestrian shopping street in Kypseli, a lower-middle-class residential neighborhood in Athens. He says he's worried that the new rules will mean the end of his business, as it abolishes fixed prices for books. / Nikos Pilos

by Nikolia Apostolou, Special for USA TODAY

by Nikolia Apostolou, Special for USA TODAY

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ATHENS - Like all booksellers in Greece, Christos Fragoulis has been shielded from competition by laws that set a minimum price for books.

But such protections to favored retailers as bookstores, pharmacies and dairies are being eliminated at the insistence of international lenders who say Greece must free its economy from over-regulation if it is to stand on its own and qualify for foreign bailouts keeping it afloat.

Fragoulis and other business owners lament that not only will they be forced out by chain stores but that a part of Greek culture will be lost, too.

"I believe the chain stores will start big sales on some of the best sellers and attract all of our customers," Fragoulis said. "I'm still here," he added. "From now on, though, I don't know what will happen."

On Wednesday, union workers in schools, pharmacies, ports and hospitals walked off the job in protest of the deregulation of Greece's tourism, food, building and retail industries as well as past austerity measures.

But Thursday's Greek bond sale showed that some international investors are confident in the direction of the country.

Greece's finance ministry said its first return to the markets in four years was a major success as the country raised more than $4 billion in the sale of five-year bonds at an interest rate of 4.75%.

International investors made up nearly 90% of the buyers in Greece's first bond sale since 2010, when it was frozen out of the international debt markets because of its severe financial crisis.

"It seems that the world community now trusts Greece once more," Finance Minister Yannis Stournaras said. "We had a very big success today."

But whether Greeks trust their government is another question.

For four years, the Greek government has cut spending on generous welfare benefits and a government jobs sector to bring its budget into balance and maintain access to bailout funds from the International Monetary Fund and other lenders.

The cuts have been painful. The country's GDP has contracted 25% and unemployment spiked to almost 28% - almost double that for young workers - and one in three Greeks have fallen below the poverty line.

To spur growth in job and incomes without more public spending, the Greece parliament passed recently a series of laws that strip favored industries of regulatory protections that have squelched competition and raised prices artificially to consumers.

Greek Prime Minister Antonis Samaras says the new measures will help businesses become more competitive, boost the economy and guarantee delivery of the next installment on a $343 billion bailout from the IMF, the European Union and European Central Bank.

"Some of these reforms were needed," said Timos Melissaris, an economist and private investor in Athens.

But some changes have infuriated Greeks more than others - none more so than the ones that affected proprietors who have been allowed to keep low-cost competitors at bay for decades.

Among them are an end to limits on pharmacy hours that prevented grocery stores with longer operating hours from opening in-store pharmacies.

Greece fixes prices for over-the-counter drugs such as aspirin and limits ownership of pharmacies to pharmacists, and each pharmacist may own only one pharmacy. The government regulates opening hours.

According to the Organization for Economic Cooperation and Development, a European agency, the result is that Greece has the largest number of pharmacists per capita in Europe (more than double the rate for France and Spain) and Greek pharmacists make above what their counterparts do for the same services.

Pharmacists argue that in Greece they provide special services because Greece looks at the business differently.

"Pharmacists give advice to people, especially now with the crisis there are so many people that are without any health insurance," said Fotini Kalpaksi, a pharmacist for more than 20 years.

As Kalpaksi spoke, a middle-aged woman left the pharmacy, saying she'd pay next week.

Then there is milk. Greece in the only country in Europe that sets prices and shelf life for milk, limiting sales to milk with an expiration date of five days.

Dairy farmers claimed the designation ensured that a core part of the Greek diet was kept safe and of high quality, but the rule kept out importers who cannot feasibly bottle and ship milk under such a short time frame. It also meant Greeks pay about a third more for dairy products than the European average.

New legislation opens up a designation for ultra-pasteurized milk that will allow imports, and "hopefully the prices of milk will decrease," says Melissaris.

As for the booksellers, it is not unusual for books in Europe to receive special protections from the free market.

France and Germany have price controls on books that keep prices artificially high so that the extra profits are used to keep on the shelves books that don't sell well but are considered important to the culture.

But important to whom, say critics? The laws replace customer preferences with those of the academics and authors who publish the works that their own citizenry do not buy in large numbers.

The German Publishers & Booksellers Association sent a letter to Samaras saying the lifting of price fixing on books will undermine Greece's commitment to a literary culture that goes back to Homer.

"In Germany, policymakers and society as a whole agree that books are not merely a commodity, but that they have a special cultural value. For this reason, books are not subjected to the forces of the market in the same way as other goods," said Heinrich Riethmüller, who heads the German association.

Fragoulis, 47, has owned his store for more than 21 years. He's managed to stay afloat by selling notebooks alongside novels. But a third of the mom-and-pop stores on this pedestrian promenade where he works have closed since the debt crisis began.

A survey by the Institute of Small Businesses said half of small and medium-sizebusinesses may close in 2014 as a result of changes that will lower profits but not operating costs such as rent, labor and insurance.

"We're facing the same fate as the rest of the middle class," said Kalpaksi, referring to the sharp decline of the middle class in Greece. "The whole market will go to five companies, and we'll be lucky if we'll even get a job as employees."

She says only big chains will be able to take advantage of the new rules because small pharmacists have to charge more for over-the-counter medicines to stock expensive prescription drugs.

"The over-the-counter drugs are what is giving us the liquidity to buy the expensive prescription medicine," said Kalpaksi.